Landlord Service Level Agreements: wishful thinking?

Posted On Thursday, 24 March 2011 02:00 Published by eProp Commercial Property News
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Typical landlord leases have about 3 pages of Tenant Obligations and maybe 5 lines of Landlord Obligations, and given that they have drawn up the lease, you wouldn't expect the bias to be any different

Michael SchirnigBut occupiers need to begin pushing back for a minimum level of service delivery - if we were spending as much money on say a 5 year fleet outsourcing contract as we do on rentals, there'd be a 30 page contract with that company, so why not an SLA for our landlords? 

It'll take some doing, and persistence, though.
 
The shock on the landlord's face was palpable, in a recent office negotiation, when we asked him to reduce his obligations related to security (number/grade of guards), preventative and aesthetic maintenance as well as cleaning (frequency) to writting and only eventually conceded due to the high vacancy rate in his office park. But it should have been a straightforward copy-and-paste of the key SLA points he had in place with his service providers...unless those also didn't exist in any meaningful detail.

Retail landlords on the other hand, even when dealing with global brands (admitedly only with small footprints), have been quite resistant to the idea of an SLA, pandering only to the needs of anchors.
The granular (and sometimes arbitrary) detail of security standards, landscaping and utilities etc may seem minor in comparison to the big ticket negotiating items like rental rates, but they're crucial to identify and quantify up front - just ask anyone whose parking lot looks terrible due to dying plants, or who has tried to operate efficiently for prolonged periods in >35 degrees heat because the landlord's cashflow constraints limit how quickly they can fix the airconditioning...  
 
The concept of a landlord SLA of course has to go hand-in-hand with remedies and related time-frames, should the landlord default, with lease cancellation as the ultimate step. But the objective is not to be vindicative and build in an automatic exit from the premises - 1st prize is always to get the landlord to provide habitable/profitable space as soon as practical after any default.  
 
Our recommendation is to carefully consider which aspects are most mission critical for your type of business, put a timeline on how long you can do without that service and then build in appropriate timeframes for landlord responsiveness.
 
And then batten down the hatches for a prolonged negotiation - the landlord SLA is a breathtaking concept (for landlords!) and will take time/energy to convert them to this line of thinking.



Last modified on Wednesday, 21 May 2014 17:09

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